Given a 25 Percent Desired Reserve Ratio, Assume the Chartered

question 90

Multiple Choice

Given a 25 percent desired reserve ratio, assume the chartered banking system is loaned up.Now assume the desired reserve ratio falls to 20 percent.As a result of this reduction:

• A)we can expect bank lending and bank profits to decline.
• B)each dollar of bank reserves will now support a maximum of $5 of demand deposits.
• C)the banking system must now reduce outstanding loans by 5 percent.
• D)the banking system can now increase lending by 5 percent.

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Definitions:

Growth Strategy

Plans and actions aimed at increasing the scale and scope of a business's operations to drive higher profits and market share.

Market Penetration

A growth strategy where a company aims to increase sales of existing products or services in its current markets, often through competitive pricing, advertising, and promotions.

Market Development

A growth strategy where a company seeks to expand its existing product or service into new markets to attract additional customers.